How to Buy a Pre-Foreclosure

Buy a home cheap during pre-foreclosure

Save money on a home purchase by finding a pre-foreclosure home to buy. Pre-foreclosure homes are also known as a short sale. The owners of pre-foreclosure homes are in default on their current mortgages. The current owner and the mortgage holder are trying to avoid foreclosure by selling the home for less than the current mortgage balance owed. A short sale is quicker for the mortgage holder by avoiding months of legal proceedings involved in foreclosure, allowing you to purchase your dream home at a discount.

Step 1

Obtain a letter of credit from your financial institution by arranging financing before making an offer on a pre-foreclosure home. A letter of credit helps you to know what your financial limits are when making offers and shows real estate agents and mortgage holders that your offers are to be taken seriously.

Step 2

Find a real estate agent who will keep track of new pre-foreclosure listings and price reductions and notify you immediately so you can submit timely offers on pre-foreclosure homes.

Step 3

Inspect the pre-foreclosure home prior to making an offer to buy. These homes are usually sold as is. Take contractors through the house to give you estimates on any necessary repairs.

Step 4

Check with the town or city to find out what the property taxes will be, if there are any assessments, easements or public accesses that you need to be aware of before making a purchase offer.

Step 5

Complete a purchase and sales agreement with your real estate agent to submit to the seller and their mortgage holder. Be sure to attach your letter of credit from your financial institution. If two similar offers are received, the one with the letter of credit will be accepted over the offer without the letter.


Call the attorney or trustee handling the foreclosure to ascertain if the property is still in foreclosure as the homeowner has up to three months to catch up on payments and stop the foreclosure process. Your real estate agent may be able to find out if other offers have been submitted, allowing you to make a higher or matching offer. The bank may counteroffer; if your offer is not accepted and no counteroffer is received, try submitting a slightly higher offer as long as it remains in your price range.


Act fast because there may be fierce competition for these housing deals.

Things You'll Need

  • Letter of credit from your financial institution

  • Financing

  • Real estate agent

  • List of homes in pre-foreclosure

  • Purchase and sales agreement